Revenue in 1H2019 was up 8.9% YoY while net earnings increased by1.1% YoY. The operating result in 1H2019 was basically in line with marketexpectation. Following adding 0.4 million tons per day （"tpd"） of water supplycapacity and 0.454 million tpd of water treatment capacity in 2018, theCompany further added 1.52 million tpd of water supply capacity and 81,000tpd of water treatment capacity in 1H2019 via acquisitions and capacityexpansions. As the Company maintained a net cash position of approximatelyHK$3 billion at the end of June 2019, we expect aggressive investment innew water resource projects in mainland China to continue going forward,mainly through acquisitions.
We adjusted our earnings estimates for the period from 2019 to 2021.
Water resources sales and property investment & development salestogether contributed 77% of consolidated revenues of GDI in 1H2019 andtheir contribution is expected to remain at such a level during the forecastperiod. Consolidated gross margin estimates from 2019 to 2021 are projectedto be 57.0%/ 57.2%/ 57.1%, respectively. Our revised EPS estimates from2019 to 2021 are HK$0.8235/ HK$0.9117/ HK$0.9445, respectively.
We reiterate the "Accumulate" investment rating and maintain the TP ofHK$17.80. We reiterate our "Accumulate" investment rating considering theCompany’s stability, high growth prospect on its water business, highdividend yield and the defensiveness of its businesses. We therefore maintainour TP of HK$17.80, which translates to 21.6x/ 19.5x/ 18.8x FY19-FY21 PERor 2.8x/ 2.6x/ 2.5x FY19-FY21 PBR.